India Microfinance

The Government of India and the World Bank last week signed an IDA credit of US$ 162.7 million (Rs 732 Crores approximately) for Rajasthan Rural Livelihoods Project, which will finance livelihood opportunities for some 400,000 village households in 17 districts of Rajasthan.

The Project will build the capacity of community institutions to deal more effectively with formal financial intermediaries, market institutions, public sector departments, and develop new partnerships with the cooperatives and the private sector.

The agreement for the Rajasthan Rural Livelihoods Project was signed by Mr. Venu Rajamony, Joint Secretary, Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; Mrs Poonam, State Project Director on behalf of the Rajasthan Government; and Mr. Roberto Zagha, Country Director India, on behalf of the World Bank.

The funding for the Rajasthan Rural Livelihoods Project will help improve economic opportunities for rural communities, especially women and marginal groups, in 9000 villages of the state. It will channel financing for income-generating activities through some 33,000 SHGs; link selected SHGs to markets; and also help develop skills for unemployed rural youth.

The Project aims to help the state government raise income levels for some 400,000 rural poor households in Rajasthan. Despite rapid decline in poverty from 50 percent in 1970 to about 24 percent in 2005, the absolute numbers of poor families in the state of Rajasthan still stand at more than 2 million (Census 2002). Recurring drought and a growing crisis in ground water supply, have further contributed to the challenges facing rural households.

“This Project with the World Bank is building on the successful livelihood initiatives undertaken in India to provide mechanisms by which rural households can improve their overall economic well-being,” said Venu Rajamony, Joint Secretary, Department of Economic Affairs, Ministry of Finance.

Mr Roberto Zagha, World Bank Country Director for India said “Global experience has shown that while general growth of the economy helps reduce poverty, it needs to be complemented by specific strategies designed to expand opportunities for the poor.”

The Project will build on lessons learned from the earlier Bank-financed Rajasthan District Poverty Initiatives Project (DPIP) which had helped poor rural communities build assets through Common Interest Groups (CIGs); provided linkages to markets; and built a cadre of trained people at the village level. However, the inability of CIG members to access funds for subsequent investments raised questions on the sustainability of the CIG model beyond the project phase.

The credit is provided by the World Bank’s fund for the poorest, the International Development Association (IDA), and has 35 years to maturity and a 10-year grace period.